Novated Leasing in Australia: Should You Get Around It? 🤔
Heard of a novated lease but not quite sure what the deal is? You’re not alone! It’s one of those things that pops up in office chat when someone gets a new car. So, is it a financial hack or just another confusing money thing? Let’s break it down,
What Even Is a Novated Lease? 🚗
A novated lease is a car financing arrangement between you, your employer, and a leasing company. Instead of getting a car loan, your employer deducts lease payments from your pre-tax salary which could mean tax savings (yay!).
Basically, your employer sorts out the payments, and you get a car without the stress of a loan. But like anything in finance, it’s not a one-size-fits-all deal.
Pros + Cons of a Novated Lease
✅ The Good Stuff
Potential tax savings – Since payments come from pre-tax salary, you could pay less income tax.
Running costs included – Fuel, rego, insurance, and servicing all bundled in, so no bill shock.
Upgrade flexibility – Fancy a new car every few years? Easy.
No GST on purchase – Yep, you don’t pay the 10% GST on the car price.
❌ The Not-So-Good Stuff
You don’t own the car – It’s a lease, so unless you buy it at the end, it’s not really yours.
You’re locked in – If you change jobs, you might have to take over the lease payments.
Balloon payment at the end – If you want to keep the car, you’ll likely need to cough up a lump sum.
Not always cheaper than buying – If you keep cars for ages, buying outright might be better long-term.
Things to Think About
💡 Do you actually need a new car? If your current one’s fine, why add another expense?
💡 Check the real costs. What’s included? What’s the balloon payment? Crunch the numbers!
💡 Job security matters. Switching jobs? Your new employer might not offer novated leasing.
💡 Compare your options. Would a regular car loan or buying outright be cheaper for you?
So, Is It Worth It? 🤷♀️
It depends! If you’re in a higher tax bracket, love having a newer car, and want predictable expenses, it could be a win. But if you’re all about owning your car long-term, prefer less commitment, or don’t want to risk job changes messing up your lease, then buying might be the better move.
At the end of the day, it’s your money and your choice so make the call that fits your financial goals.
Want to know more about novated leases?
We have a whole podcast episode dedicated to the topic where we dive deeper into all things novated leases